Waverly City Council member, Kim Billington stands in the town's post office, July 11, 2011 in Waverly, Wash. Nearly half of the 100 residents of Waverly turned out Monday night to protest plans to close the post office in the south Spokane County town. Town Council member Kim Billington says the post office is the only building in town that is staffed every day. Waverly is one of about 2,500 small post offices targeted for closure in a Postal Service budget-cutting plan. Residents will learn the fate of their post office later this year. (AP Photo/The Spokesman-Review, Dan Pelle)

— The U.S. Postal Service is about to shrink, and your local office may be one that's on its hit list.

The Postal Service, which has been losing billions of dollars as more people communicate online, said Tuesday that it is considering closing 12 percent of its post office locations and working with local businesses to fill the void.

The 3,653 post offices under review for closure include urban centers such as New York, Chicago and Los Angeles, as well as small towns from Plymouth, Mass., to Wallula, Wash. The Postal Service is calling them “low activity,” defined by low foot traffic, average sales of less than $50 per day and less than two hours of work per day. Most are located within five miles of another post office location. About 3,000 of them bring in less than $27,500 in annual revenue.

In place of a dedicated post office, the Postal Service is proposing that pharmacies and other retailers sell stamps, flat-rate packaging and other products, a concept it’s calling the “Village Post Office.”

“Today, more than 35 percent of the Postal Service’s retail revenue comes from expanded access locations such as grocery stores, drug stores, office supply stores, retail chains, self-service kiosks, ATMs and usps.com, open 24/7,” Postmaster General Patrick Donahoe said in a statement. “Our customer’s habits have made it clear that they no longer require a physical post office to conduct most of their postal business.”

Postal Service spokeswoman Sue Brennan would not say whether the goal is to close all 3,700 locations, or whether there is a smaller target number of closures.

The plan is the latest move by the government enterprise to stave off a mounting financial crisis. The Postal Service, which primarily makes money by selling postage, has been badly hurt as people have shifted communications to e-mail and the Internet, and as competitors such as FedEx and UPS have increased their reach. In 2010, mail volumes fell 3.5 percent, pushing the Postal Service to a record net loss of $8.5 billion. The wider losses have continued through the first two quarters of the current fiscal year.

To cut costs, the Postal Service has chopped 110,000 jobs over four years, helping it save $12 billion. This year, the service announced it would stop some types of contributions to the Federal Employees Retirement System. Performance bonuses and other discretionary pay for executives and senior managers landed on the chopping block earlier this month; clerks, mechanics, drivers and other members of the American Postal Workers Union have agreed to wage freezes, higher health care costs and other contract concessions.

The Postal Service is asking lawmakers for permission to cut Saturday mail delivery, which it says could save $3.1 billion a year. The Postal Regulatory Commission, an independent oversight agency, has estimated the savings would be about half that much.

It is also pushing Congress to free it of an obligation to prepay retiree health benefits — the next payment of $5.5 billion is due in September — and to allow it access to as much as $80 billion in “overpayments” it has made to federal retirement programs.